Fraud and Abuse Update: DOJ Announces $11.75 Settlement with Costco of Alleged Pharmacy Fraud

hammer-to-fall-673264-mOn January 19, 2017, the United States Department of Justice (DOJ) issued a press release announcing a deal reached with Costco Wholesale to resolve DOJ’s disputed allegations that Costco violated Federal law in filling prescriptions by lax protocol.  The allegations against Costco stem from an investigation by the United States Drug Enforcement Agency (DEA) Diversion Groups based in Seattle, Los Angeles, Sacramento and Detroit.

Georgia Healthcare and Business Litigation Law Firm

Our Atlanta and Augusta-based business law firm closely follows healthcare industry legal developments, including the healthcare fraud and abuse matters.  A strong focus of the DEA and supporting Federal and State law enforcement activities is the current epidemic of Opioid abuse in the United States.  According to the United States Centers for Disease Control and Prevention (CDC), deaths from Opioid overdose in the United States have quadrupled since 1999; and during the same period, sales of these drugs quadrupled.  The most common such Opioids are Methadone, Oxycodone and Hydrocodone.  “Pill mills” are a principal target of DEA and State law enforcement efforts.  To combat pill mills and other circumstances that may give rise to misuse of opioids and controlled substances, the DEA will pursue healthcare providers and entities that fail to strictly follow legal protocols in prescribing or dispensing controlled substances.

According to related legal documents, during the three-year period from about the beginning of January 2012, through the end of 2015, particular Costco Pharmacies dispensed controlled substances in a manner that was not compliant with the Federal Controlled Substances Act (CSA) and applicable Federal regulations.  According to the DOJ’s press release, Costco’s noncompliance with the CSA included filling prescriptions from doctors who did not have a valid DEA number; not properly and accurately recording DEA numbers; filling prescriptions outside the scope of a practitioner’s DEA registration; filling prescriptions without all required information; not maintaining accurate dispensing records; and failing to maintain appropriate records.

The DEA emphasized its appreciation for Costco’s cooperation in resolving the investigation.  DOJ’s counsel, United States Attorney Barbara L. McQuade,  said, “We applaud Costco for working with DEA and taking steps to tighten up its compliance to ensure that prescription pills do not end up on the street market.”  Responding to the compliance problems illuminated by the DEA’s investigation, Costco purchased a new pharmacy management system, which cost over $127 million.  Additionally, Costco has instituted a new audit system with multiple audit layers and supervisors.  The DEA will be permitted to conduct unannounced and unrestricted audits of all Costco Pharmacies without warrants going forward.  And Costco has agreed to pay $11.75 million as part of the settlement.  Because of the dangers and serious healthcare risks associated with misuse of controlled substances, it is expected that DEA and state law enforcement activities will continue to aggressively look for and prosecute healthcare providers and businesses that are perceived to be in noncompliance with legal protocols.

Hamil Little PC

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Source: DOJ Press Release

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